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Shiho Fukada / AP Carl Icahn |
Famed corporate raider Carl Icahn said he offered to underwrite a $6 billion loan to CIT Group, complaining that horse-trading between the troubled lender and its largest creditors was harming other bondholders.
In a letter to CIT's [CIT
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] board on Monday, Icahn said the cash-strapped commercial lender is offering certain large bondholders the opportunity to purchase $6 billion in secured loans well below their fair market value.
The billionaire investor, who has made himself a champion of corporate governance, said the offer to large creditors comes at the expense of thousands of smaller bondholders.
"This is reminiscent of the old Tammany political machine's vote-getting tactics," wrote Icahn. He was not immediately available for further comment.
Icahn said he sees no reason why the current CIT board should continue to control the company.
Icahn offered to underwrite a $6 billion loan that he said would save the company as much as $150 million in fees to prospective lenders under the company's proposal.
Icahn contends other banks would be eager to underwrite the financing if they were not required to approve CIT's reorganization.
On Friday, CIT said it agreed with a group representing its bondholders on changes to the company's proposed restructuring plan. The changes include a mechanism to accelerate the repayment of new notes; the shortening of maturities by six months for all new notes and junior credit facilities; and offering more equity to subordinated debt holders.
On Oct. 1, CIT launched a debt-exchange plan as it looked to cut its debt by at least $5.7 billion.
The company, one of the largest lenders to small and mid-sized companies, also asked bondholders to approve a prepackaged plan of reorganization that would allow it to initiate a voluntary bankruptcy filing under Chapter 11 if the debt exchange failed.
CIT said on Friday that completion of either the debt exchange or a bankruptcy filing would generate significant capital and improve its liquidity.
CIT received an emergency loan from a group of bondholders in July. The group included Pacific Investment Management, Baupost Group, Centerbridge Partners, Oaktree Capital Management, Capital Research & Management and Silver Point Capital.
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